Ever-so-slowly moving to reconcile screwing thousands of borrowers, big banks have completed about $22 billion in customer relief through September. Almost 300,000 borrowers are getting refinancing and other breaks to reconcile “underwater” mortgages and fraudulent papers generated at the height of the housing boom. Fraudulent practices continue, however, and federal regulators are now focusing on mortgage deals advertised by lenders that are “too good to be true.”
For a pdf version of the full stories, plus contextual articles in social, environmental and legal areas, contact Bo McCarver at email@example.com
Big U.S. banks give $22 billion under mortgage relief deal
By Rick Rothacker Reuters November 19, 2012
Five U.S. banks have provided about $22 billion in mortgage relief to customers under a deal to settle borrowers’ accusations over foreclosures, a report by the settlement’s monitor said on Monday.
The report said that Bank of America Corp, which owes the most, improved in delivering first-lien mortgage modifications to customers, trailing only JPMorgan Chase & Co through September.
Bank of America provided $889.2 million in first-lien modifications that reduced loan balances for consumers, a turnaround from August when the bank had completed none. JPMorgan Chase & Co’s total was $903.1 million in modifications, the most of the five banks.
Monday’s report by Joseph Smith, the former North Carolina Banking Commissioner who is serving as the settlement’s monitor, said the five banks together have completed about $22 billion in customer relief, up from $10.6 billion in August.
Smith said in an interview that he was “encouraged” and that February’s settlement between five banks and federal and state officials had “made significant progress.” But he cautioned that no banks have met their obligations until their numbers are reviewed and credited.
Counting $4.2 billion more in active trial modifications, the five banks have provided $26.1 billion in relief through September to 300,000 borrowers, according to the report.
Regulators go after deceptive mortgage advertising
By Lindsay Wise McClatchy Newspapers November 19, 2012
WASHINGTON — Federal regulators on Monday announced investigations into possible violations of the law by mortgage lenders and brokers suspected of false or deceptive advertising.
The Federal Trade Commission and the Consumer Financial Protection Bureau said Monday that they’d opened 19 investigations after a joint “sweep” of more than 800 ads. They also issued 32 warning letters to lenders and brokers.
“Misrepresentations in advertising for mortgage products pose a significant risk of harm to consumers because they can confuse and mislead consumers when they are making one of the biggest financial transactions of their lives,” said Kent Markus, the consumer bureau’s assistant director of enforcement. “Those problems can be particularly significant for veterans and older Americans.”
2 Banks Settle With S.E.C. on Mortgage Securities
By Jessica Silver-Greenberg New York Times November 16, 2012
JPMorgan Chase and Credit Suisse have agreed to settlements with the Securities and Exchange Commission totaling $417 million over their packaging and sale of troubled mortgage securities to investors, the agency said Friday. The settlements are the latest major penalties extracted by the agency in a broad investigation into the way Wall Street firms bundled mortgages into complex investments before the financial crisis.
The S.E.C. has leveled claims against a handful of major banks, including JPMorgan and Credit Suisse, that they painted a deceptively rosy portrait of the securities while some of the underlying loans were already showing signs of delinquency.
Robert Khuzami, director of the S.E.C.’s Division of Enforcement, called mortgage products like those sold by the banks “ground zero in the financial crisis” in a statement Friday. The S.E.C. cautioned Wall Street to brace itself for more enforcement actions.
Housing not yet out of the woods: Bernanke
By Karen Jacobs Reuters November 15, 2012
The improving far from being out of the woods,” Federal Reserve Chairman Ben Bernanke said on Thursday, arguing that overly tight lending standards are part of the problem.
The Fed, which has focused on mortgage bonds in its latest round of asset purchases, will continue to do what it can to support the housing market, Bernanke said in a speech that avoided policy specifics.
A bubble in the U.S. housing market was at the core of the 2007-2009 financial crisis and brutal recession that continues to hamper the world economy. Data in recent months, however, have shown the sector is on the mend.
FHA gives those who defaulted on homes another chance
The FHA is a major source of cash for so-called rebound buyers, but the bankrolling of borrowers who contributed to the last housing bubble is raising concerns.
By Alejandro Lazo and Walter Hamilton Los Angeles Times November 14, 2012
After two foreclosures and two bankruptcies, Hermes Maldonado is as surprised as anyone that he’s getting a third shot at homeownership.
The 61-year-old machine operator at a plastics factory bought a $170,000 house in Moreno Valley this summer that boasts laminate-wood floors and squeaky clean appliances. He got the four-bedroom, two-story house despite a pockmarked credit history.
The last time he owned a home, Maldonado refinanced four times and took on a second mortgage. He put a Cadillac and Mercedes-Benz C300W in the driveway and racked up about $45,000 in credit card bills and other debts. His debt-fueled lifestyle ended only when he was forced into bankruptcy.
take out a second mortgage. Live with what you can, and don’t spend more than you earn.”
Hidden Housing Subsidy May Soon Come Out Of Hiding
By Jacob Goldstein NPR November 16, 2012
The federal government has all these ways of paying people to buy houses without actually, you know, paying people to buy houses.
We’ve talked a lot about two examples of this:
1. The mortgage-interest tax deduction is effectively a government payment to people who are paying a mortgage.
2. Fannie Mae and Freddie Mac allow home buyers to get below-market-rate mortgages. They blew up in the housing bust, requiring a massive federal bailout.
We haven’t talked so much about a third example of a federal housing subsidy that doesn’t seem like a subsidy: the Federal Housing Administration, aka FHA.
Like Fannie and Freddie before the housing crisis, FHA has always funded itself. And, like Fannie and Freddie after the crisis, FHA may soon need a taxpayer bailout. An audit of FHA released today found that the agency is $16 billion in the hole.
The FHA doesn’t actually make loans. It guarantees them. If you get an FHA-backed mortgage and don’t pay it back, the FHA has to make up the difference. The FHA requires everyone who gets an FHA loan to buy insurance, which is supposed to cover losses when borrowers default.
But the system only works if the FHA prices the insurance correctly. And it appears that, during the early part of the housing bust, the FHA did not collect enough in premiums to pay off losses it will incur in the coming years.
The trouble is likely to come from loans made in 2008 and 2009. At that time, it became increasingly difficult to get a private loan. So more and more borrowers turned to FHA-backed loans, and the agency wound up backing hundreds of billions of dollars in mortgages.
On top of that, FHA loans require only a tiny down payment — as little as 3.5 percent. As a result, when housing prices decline, borrowers very quickly end up owing more than their home is worth. This dramatically raises the risk of default.
The agency has been raising the premiums it charges, among other steps, to try to fix the problem. But today’s audit suggests that those steps haven’t plugged the hole. FHA will probably need taxpayer money to make good on the promises it made as the housing market was collapsing.
Report: Negative equity declines with rising prices
By Alejandro Lazo Los Angeles Times November 15, 2012
Rising home prices are helping trim the ranks of underwater homeowners in Los Angeles and Orange counties, a new report by real estate information company Zillow Inc. says.
There were an estimated 438,012 homes underwater in Los Angeles and Orange counties in the third quarter. A home is underwater when the outstanding debt on the property is more than what the home would fetch in a sale.
That represented about 25.9% of homes with mortgages in the region, down from 28.9% in the second quarter.
The website estimates that there is roughly $58.9 billion worth of negative equity in the two counties.
In a news release, Zillow chief economist Stan Humphries said the decrease in negative equity should help homeowners looking to refinance out of costly loans or sell their properties. Of homes that were in negative equity at the end of the third quarter, 2 in 5 were underwater by 20% or less, Zillow estimated.
“A substantial number of homes are still locked up in negative equity, unable to enter the existing resale market despite the desires of their owner,” Humphries said. “The housing market has found real momentum of its own but is not immune from shocks to the broader economy.”
Nationally, homes with negative equity declined to 28.2% of all homes in the third quarter from 30.9% in the previous quarter. It was the first time that Zillow’s report had noted negative equity falling below 30%.
Slightly more than 14 million U.S. homeowners with a mortgage were underwater last quarter, down from 15.3 million in the second quarter. Of the 30 major metropolitan area covered in the Zillow report, the ones with the biggest drops in negative equity were Phoenix, Las Vegas, Denver, Sacramento and Orlando, Fla.
Freddie Mac: Mortgage rates scrape bottom again; 30-year at 3.34%
By E. Scott Reckard Los Angeles Times November 15, 2012
Lenders were offering fixed-rate 30-year home loans to solid borrowers at an average of 3.34% this week, the latest in a series of record low mortgage rates, according to home finance giant Freddie Mac.
The borrowers would have paid 0.7% of the loan amount to the lender in upfront fees and discount points to obtain the rate, Freddie said Thursday in its weekly report. The previous record low, set the first week of October, was 3.36% with 0.6% in fees and points.
The typical rate on a 15-year fixed mortgage of 2.65% with 0.7% in lender fees also was a record, a notch below the previous record low of 2.66% in mid-October.
Concerns over recession in Europe and the looming U.S. of higher taxes and cuts in government spending have sent investors scurrying out of stocks and into the relative safety of Treasury securities. The yield on the 10-year Treasury note, a benchmark for fixed-rate mortgages, fell below 1.6% Thursday for the first time since early September.
The rates are falling at a time of increasing consumer confidence, helping to drive a recovery in the housing markets, with home sales and prices on the rise in many markets, including Southern California.
The improving economy and tighter lending standards have sent the number of past-due loans to the lowest level since 2008, with foreclosures also down sharply, the Mortgage Bankers Assn. said in a separate report Thursday.
However, the delinquency rate is still four times the long-term average, Michael Fratantoni, the trade associations vice president or research and economics, cautioned in an interview.
The widely followed Freddie Mac survey asks lenders across the nation early each week to report popular combinations of rates and points they are offering to borrowers with good credit scores, solid income and 20% down payments or equivalent home equity if they are refinancing.
Third-party costs such as appraisals and title insurance are extra, and solid borrowers often can find slightly better rates by shopping around.
Home sales up, inventory down: good for home prices and for builders
The US housing recovery marched on in October with several positive signs: sales, prices, and permits to build new homes were up, and the supply of homes for sale was the lowest in years.
By Mark Trumbull Christian Science Monitor November 19, 2012
The US housing recovery continued in October, with a relatively tight market raising the prospect of further gains in home prices – and a revival of new construction.
Sales of previously owned homes and condominiums rose to an annualized rate of 4.79 million units in October, the National Association of Realtors said Monday. That’s not a big change from the prior two months, but what’s notable is that the inventory of homes available “for sale” has been falling steadily since April.
The current inventory represents a 5.4-month supply at the current sales pace, the lowest since February 2006 – before the housing boom peaked and the market crashed.
Tightening supplies are one reason prices have been rising. The median price for a previously owned home was $178,600 in October, up 11 percent from a year ago.
Many housing analysts are predicting more gains in prices, as long as the economic recovery remains intact. In turn, all this confirms to homebuilders that they can get more people busy with hammers and concrete mixers.
Housing starts hit four-year high in October
Reuters November 20, 2012
Housing starts rose to their highest rate in more than four years in October, suggesting the housing market recovery was gaining steam, even though permits for future construction fell.
The Commerce Department said on Tuesday housing starts increased 3.6 percent to a seasonally adjusted annual rate of 894,000 units — the highest since July 2008.
September’s starts were revised down to show a 863,000-unit pace instead of the previously reported 872,000 units. Economists had expected groundbreaking to slow to a 840,000-unit rate last month.
The department said superstorm Sandy, which slammed the East Coast in late October, had a minimal impact on the data. The Northeast accounted for about 8 percent of overall housing starts. Groundbreaking in the Northeast fell 6.5 percent.
In housing vote, hints of future city politics
By Jody Seaborn Austin American-Statesman November 15, 2012
The biggest surprise of last week’s elections was the defeat of Proposition 15, the bond measure that would have provided $78.3 million to build and renovate affordable housing. Of the eight bond proposals Austin voters were asked to consider Nov. 6 — seven from the city and one from Central Health for a medical school — Proposition 15 was the only one voters rejected.
The defeat of Proposition 15 six years after a similar, $55 million measure passed with 62 percent of the vote left affordable housing advocates reeling and desperately searching for an explanation. The language on the ballot was too brief, they’ve said for starters; unlike the language for the 2006 housing measure voters approved, this year’s ballot failed to adequately describe Proposition 15’s purpose.
True enough. The ballot language was unnecessarily spare — “The issuance of $78,300,000 housing bonds and notes and the levy of a tax sufficient to pay for the bonds and notes” — and the key word “affordable” was inexplicably missing. The number of boilerplate words common to any bond proposition (“the levy of a tax …”) exceeded the number of words in the measure’s purpose (housing bonds).